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Leveraging the Upside of the Downturn The first thing many companies do in a down-turn is slash marketing budgets. There is an upside to remaining positive however, particularly if you're focused on growth.

By Taryn Hunter Sharman

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So, what do we have here? An economic downturn, yet another fuel price increase, throw in some political uncertainty, add a fair amount of darkness to the mix (no pun intended Eskom) and we have the perfect storm for a typical reaction… cut marketing budgets. We see it all the time.

And while this typical response, is well, typical in this kind of market – we should also take the time to stop and think about whether our knee-jerk reaction is the right solution to acquiring and retaining business.

Businesses that continue marketing enjoy growth

Harvard Business Review (amongst others) has done research on companies that have slashed their budgets in recessions and depressions. In fact, these studies and anecdotes suggest that advertising when the economy is bad can lead to growth:

  • During the Great Depression, General Motors pioneered the use of outdoor billboards and radio to advertise its budget brand, Chevrolet. Although Ford had been a leader in the automotive industry for years, by 1931 Ford was consistently being outsold by Chevy.
  • According to a study of the 1974-1975 recession from American Business Press and Meldrum and Fewsmith, "companies which did not cut marketing expenditures experienced higher sales and net income during those two years and the two years following than those companies which cut in either or both recession years."
  • According to McGraw-Hill Research's look at the 1985 recession, companies that either maintained or increased their ad budgets during that time experienced a 256% increase in sales versus companies that cut their ad budgets.
  • And according to a 1990 study from the WPP Group's Centre for Research and Development, companies that increased their ad spending by 20% to 100% saw an average gain of 0.9% of the market share, while those that cut spending only gained 0.2% of the market share.

Related: How to Craft a Marketing Strategy That Converts Into Sales

Harvard Business Review goes on to quote that "Companies that injudiciously slash marketing spending often find that they later must spend far more than they saved in order to recover from their prolonged absence from the media landscape."

To market or not to market

We see and experience this in South Africa too – we saw it hit in 2008-2009, and for some the delayed repercussions of that in 2011. The outcome remained the same, with severe market share lost by pulling out of the market, requiring triple the budget to get back to pre-recession performance in the recovering years.

Understandably, this can all feel like theory, particularly when you are the one crunching the numbers, battening down the hatches and facing the storm.

However you interpret these truths for your reality, in my mind it really leaves us with two scenarios to leverage.

Best case scenario: Marketing Stays. Be Brave. Act Lean.

You are not alone. You are facing the same storm alongside many others across various industries. Check your sector – have your competitors pulled out?

If so, face to the wind and shoulder to the grind, this is the opportunity for sustained advantage. If not, this is the time to dig deep and maintain your position. Whether you're a massive corporate or a medium enterprise, the impact is relative, and scary.

Related: The Formula To Sales and Marketing Success

But the truth of the matter is that this too shall pass. Negative sentiment, political uncertainty and budgetary challenges are not new to us.

You seize the opportunities, explore the gap in the market, think smart, act fast and make a plan.

This requires the organisation to remain agile, CEOs to remain inspired and determined, management to have versatile and diversified skills and for dedicated staff to go the extra mile.

You work as a team to creatively fill the gaps while wearing multiple hats in the decision-making process. Ultimately you see and weather the storm for what it is whilst keeping marketing budgets the same. It's as simple as – if you aren't seen you aren't known.

Worst case scenario: Marketing Goes. Be Brave. Lean In.

During an economic downturn (and any change), it's more important than ever to communicate effectively with staff.

Few people thrive when feeling insecure and unsure about their future. Use your time wisely, like that of a multinational gym franchise who recently took time to create strategic future-proofing sessions with diverse audiences to gain insight into what the next wave of their strategy should be following the current market shift.

It's a time of intense anxiety amongst staff, often breeding cynicism and reduced performance. Just recently I had an estate agent call to try sell me a property, he spent a good 10 minutes telling me why it wasn't a good investment based on the country, the politics, the power and value of the Rand (the usual).

Related: Staying Calm Is the Best Response to a Down Market

I stopped him in his tracks, and spent another 10 minutes telling him how we were committed to South Africa, believe in our ability to make things happen, and how we were working hard as entrepreneurs to remain resilient and continue to build and grow – and as such 2018/19 has been one of the most successful and impactful years for brands and businesses we've worked on. I then asked him to start again, and really sell me the house this time.

The point is, everyone is feeling deflated and anxious, and so CEOs need to more than ever drive company culture and direction. Staff work best when there's a clear picture of the organisation's direction, the role they can play, and more often than not, they'd be keen to pitch in.

If you're going to slash your marketing budget – keep some aside for internal campaigns, consistent communication and staff motivation.

Related: How OLC Went From R50 Million to R130 Million in 2 Years

Taryn Hunter Sharman

Chief Founder and Creative Catalyst of Faith & Fear

During her 12-year tenure as MD of successful integrated marketing communications agency, Ebony+Ivory, Taryn Hunter Sharman was named as runner-up ‘Business Woman of the Year’ based on building a of 40 (100% growth over 5 years) and taking the firm’s growth from R20-million to R70-million in just two years.
In 2015, Taryn launched Faith & Fear, a new breed of consultancy that combines strategic thinking with smart creative. 

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